For $10,000, You Can Purchase a Five-Year Annuity That Will

question 29

Multiple Choice

For $10,000, you can purchase a five-year annuity that will pay $2,358.65 per year for five years. The payments occur at the beginning of each year. Calculate the effective annual interest rate implied by this arrangement.

• A)8 percent
• B)9 percent
• C)10 percent
• D)11 percent

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Definitions:

Square Root Property

States that if x^2 = a, where a is a non-negative real number, then x = ±√a, identifying two possible solutions for x.

Factoring

The process of breaking down an expression into its simpler components or factors that, when multiplied together, result in the original expression.

Square Root Property

A principle stating that for any positive number \(x\), if \(y^2 = x\), then \(y\) is a square root of \(x\).

Complex Solutions

Solutions to equations that include the square root of a negative number, typically represented as a combination of a real number and an imaginary number.